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C o u n t r y b r i e f i n g

BrazilSouth amecs gest economy s shkngoff ecesson nd nvestng n the futue

Politics/EconomyBrazilians have long quipped that Brazil is

the country o the uture, and then they add:

and it always will be! But, at last, it appears

to be coming close to ullling its promise.

The countrys Ministry o Finance is

optimistic about the economic outlook or

2010, signalling a return to the kind o robust

growth it saw during most o the last decade.

The ministry expects GDP growth o around

5%, compared to -0.5% in 2009. And investors

have seen the countrys stock market the

Bovespa rebound, with six months o

consecutive growth to January 2010.

The governments statistical oce, IBGE,

reported overall growth o 5.8% or industrial

output or the nal quarter o 2009, compared

to a all o 14.6% in the rst quarter o last year,

when Brazil was in the throes o a what turned

out to be a short-lived recession. Brazil also hit

its infation target o 4.3% at the year-end 2009.

As that ability to bounce back demonstrates,

Brazil sometimes seen as the odd man out

in the line up o BRIC countries (compared

to Russia, India and China) is conrming its

status as a uture economic powerhouse.

A lot o the credit goes to President Luiz

Incio Lula da Silvas government, which

has helped to generate strong domesticgrowth with policies or labour orce, wage

ssue fve I

and credit expansion. It also introduced

industrial tax breaks to stimulate sales o cars

and durable goods such as electro-domestic

appliances, even i it is now looking to stop

those as economic pressures ease.

Rising demand is evident across a broad set

o sectors and regions, rom consumer goods

to services, with optimism urther uelled by

Brazils selection as host nation or the FIFA

World Cup in 2014 and the Olympics in 2016.

But perhaps most signicant o all was the

discovery o a vast oil eld o the countrys

southern coast in 2008.

Those actors have been a llip to the

popularity o President Lula. Ater the maximum

two terms in oce, he will be standing down in

2010, and is positioning his chie o sta, Dilma

Rousse, against Jos Serra o the centralist

Partido da Social Democracia Brasileira

(PSDB) in the October run-o.

Population/SkillsWithin its population o 198 million, Brazil has a

young workorce centered in the southeastern

industrial heartland o So Paulo and Rio de

Janeiro. Young workers (aged 17-29) already

represent a quarter almost 25 million o

the economically active population.

According to IBGE, unemployment roseto 8.1% o the workorce in 2009 during the

recession, up marginally rom 7.9% in the

boom year o 2008. And although the job

market was squeezed during 2009, income

levels rose on average by 3.2%.

While experts point to ample workorce

numbers, fuent English language speakers with

IT skills are still scarce and, to meet the pace o

growth, multinational IT companies active in

Brazil oten provide their own in-house training.

Telecoms / ITAccording to Carlos Rego Gil, president o

Brasscom, Brazils ICT industry group, the

country has the worlds eighth largest internal IT

market. Analyst group IDC orecasts spending

o $32.6 billion on hardware, sotware and

services in 2010 compared to $30 billion in

2009. IDC explains that IT projects last year

ocused on saving costs such as virtualisation

and outsourcing; this year, spending will be

infuenced by an expanding economy as well as

continuing investments to ensure eciencies.

Brazil is also turning into a hot outsourcing

destination especially or US companies.

Estimates or 2009 show $3 billion in oshore

outsourcing services exports a raction o

Indias $50 billion, but growing at about 36%

annually. Thats something the government is

happy to support Law 11,774 (passed in2008) reduced labour taxes across the board

or employers in the IT and BPO sector.

In telecoms, the country has become the

worlds th largest mobile phone market, with

174 million subscribers by the end o 2009.

Although around 80% o the market is

dominated by less lucrative prepaid users, the

competition between mobile phone operators

is erce. Vivo, the largest mobile phone operator,

which is jointly owned by Spains Telenica

brAZiL:Key inDiCAtorS

2008 2009 2010 2011

GDP growth 5.1% -0.3% 4.8% 4.5%

Consumer price infation 5.7% 4.9% 4.3% 4.2%

Current-account balance (% o GDP) -1.7% -1.0% -2.2% -2.9%

Source: Economist Intelligence Unit

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An expert analyst predicts a bright future forenterprise IT in Brazil

Reinaldo Roveri,Enterprise solutionsresearch manager, IDC Brazil

From let:

Brazils President Lulasteps down this year;

industrial farmland in

the Forest of Iguau

National Park; So

Paulo is the countrys

largest city; the only

place for Mardi Gras:

Rio De Janeiro

ssue fveI

DoW nL oAD tH iS At

www.i-cio.com/datafeed

and Portugal Telecom, competes head-to-head

(in order o market share) against Mexicos

Claro, Italys TIM and Brazils landline giant, Oi.

The telecoms sector is likely to engage in

strong spending as the economic upswing

kicks in and more sophisticated devices are

adopted. IDC estimates $87 billion in telecoms-

related spending in 2010, up $2 billion on last

year, as the economy picks up and the build up

to the World Cup and Olympics gets underway.

These events will need heavy investment the

World Cup in particular will span many cities

with outdated telecoms inrastructure.

Mobile broadband is already surging ahead

o xed internet. Julio Puchel, an analyst at

Yankee Group, oresees 14 million people using

3G services in 2010, more than the 12 million

using xed broadband line connections. This

compares to six million mobile and 11 million

xed connections in 2009.

Enterprise demand or ICT products and services eased in2009 as the downturn orced companies to trim spending.But IT and telecoms spending continued on tools designed toreduce costs, such as voice-over-IP (VoIP), outsourcing andvirtualisation, and even though the countrys short recession

prompted many companies to reset their priorities, IT andtelecoms spending in 2010 should recover to pre-crisis levels.Companies will seek to beneft rom Brazils economic growthand to prepare or the World Cup and the Olympics. Forinstance, telecoms operators are likely to hike investmentsin triple play to boost voice, data and video revenues.

This year should also be the watershed year or smartphones,as ast-rising adoption triggers spending on projects needed to

tie devices to IT inrastructure. Data centre service providerswill pump resources into cloud computing to oer businessintelligence, VPN, non-mission critical ERP and CRM services.

As well as a rekindled demand or hardware (PCs, notebooks andservers), areas o growth will include collaboration (especiallyvideoconerencing) and business intelligence and governancesotware, to balance cost-cutting with measured expansion.

Sources: Dow Jones Newswires, Anatel, IDC, Yankee Group,

Valor Economico, Ministry o Trade and Development,

Economist Intelligence Unit, Teleco, IBGE, Brasscom

brAZiLS SoftWAreAnD it SerViCeSeXPortS

2006 2007 2008 2009* 2010*Sources: Banco Central do B rasil, IDC, Brasscom

$604million

$800million

$2.2billion

$3billion

$3.5billion

*estimated